Question 42

A Section 457 Deferred Compensation plan is provided specifically for employees of states, counties, or municipalities.

A Section 457 Deferred Compensation plan is designed to benefit employees of states, counties, or municipalities, allowing these public sector workers to defer a portion of their salary for retirement savings.

A) sole proprietorships.

Sole proprietorships are individually owned businesses and do not qualify for Section 457 plans. These plans are specifically tailored for government employees, making this option incorrect.

B) religious organizations.

While religious organizations can offer various retirement plans, a Section 457 plan is not specifically designated for their employees. This makes option B incorrect in the context of the question.

C) non-profit organizations.

Non-profit organizations typically do not fall under the provisions of Section 457 plans. Instead, these plans are intended for government workers, meaning option C is also incorrect.

D) states, counties, or municipalities.

This option is correct as Section 457 Deferred Compensation plans are specifically established for employees of government entities, including states, counties, and municipalities, allowing them to save for retirement in a tax-advantaged manner.

Conclusion

The correct answer, D, is definitively right because Section 457 Deferred Compensation plans are uniquely designed for public sector employees, facilitating their retirement savings. All other options fail as they do not pertain to the specific grouping of employees that Section 457 plans are meant to serve.